Debt: S&P Affirms US AAA Rating, Cuts Outlook to Negative

Debt: S&P Affirms US AAA Rating, Cuts Outlook to Negative - CNBC

Standard & Poor's on Monday downgraded the outlook for the United States to negative, saying it believes there's a risk U.S. policymakers may not reach agreement on how to address the country's long-term fiscal pressures.


"Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.

In an interview with CNBC, David Beers, S&P's global head of sovereign ratings, said the agency has been "struck increasingly by the difference in how other governments are dealing with fiscal consolidation."

"The U.S. to us looks to be an increasing outlier in that context," Beers added.

Rival ratings agencies Fitch and Moody's [MCO 35.50 -0.36 (-1%) ] maintained their respective outlooks on the United States, according to statements made to CNBC.

"Moody’s is not reacting to S&P's move. Moody’s outlook for the US Aaa rating remains stable," Moody's spokesman Eduardo Barker said in an email.

The Dow Jones industrial average tumbled more than 200 points on word of the revision, while gold prices hit a new record above $1,496 an ounce before paring some gains. The dollar index moved higher in New York trade.

The S&P said the move signals there's at least a one-in-three likelihood that it could lower its long-term rating on the United States within two years.

In an interview with CNBC, Austan Goolsbee, chairman of the Council of Economic Advisers, characterized the S&P move as a "political judgement."

"What the S&P is doing is making a political judgement and it's one we don't agree with, and it appeared to me that Moody's and some others don't agree with that judgement," Goolsbee said.

The U.S. Treasury also voiced disagreement with the S&P revision.

"...We believe S&P's negative outlook underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation," Treasury Assistant Secretary Mary Miller said in a statement.

The last time the United States was placed on a negative watch was in January 1996. Moody's made the call at that time, after congressional Republicans refused a vote on the U.S. debt ceiling, a topic that is once again at the center of debate in Washington.

http://www.cnbc.com/id/42643384